SEC wants freezing of $1.4m as money may go to widow of Forex fraudster
The money is in danger of leaving the US and then the Commission may not be able to fully collect on its claims in the case against FX & Beyond.
The United States Securities and Exchange Commission (SEC) is seeking an emergency asset freeze order, as the regulator is worried that a significant sum of money may go to the widow of Steve H. Karroum, former President of FX & Beyond Corporation.
From December 2007 through May 2014, Mr Karroum solicited approximately $4 million from 18 investors for himself and on behalf of his company to be used for Forex trading. He failed to register the investment offerings with the SEC as required. He also failed to invest the funds in Forex trading. Instead, he deposited the funds in FX & Beyond’s account and misappropriated investor funds for his and his wife’s personal use or benefit. Mr Karroum further misled investors by providing materially false or misleading account statements purporting to show profits from Forex trading.
In February, the Magistrate Judge assigned to the case issued a Report and Recommendations recommending the entry of default judgement in favor of the Securities and Exchange Commission against the defendants. SEC is entitled to damages in the total amount of $1,537,290, which comprises disgorgement, prejudgment interest, and a civil monetary penalty. The Magistrate Judge further recommended that Defendants be enjoined from further violating the Securities Act and the Exchange Act.
Ever since, however, the proceedings in the case have been hampered by the actions of Sahar Karroum, the widow of Mr Karroum, who has refused to take any responsibility for the fraudulent actions of her late husband and the losses suffered by investors. The Commission has obtained the Court’s consent to substitute Sahar Karroum as a defendant in the fraud case and has sought a judgement against Ms Karroum. SEC has proposed a final judgment that would award disgorgement and prejudgment interest against Ms Karroum to the same extent the initial proposed final judgment would award disgorgement and prejudgment interest against Mr Karroum.
Now, the US regulator faces another challenge – gathering the money. According to the latest court filings, the Commission requests that the Virginia Eastern District Court immediately freeze $1,392,656.21 in proceeds of an insurance policy owned by FX & Beyond Corporation that are expected to be paid shortly to Sahar Karroum, who currently resides in Lebanon. That sum is equal to the total monetary relief recommended by Magistrate Judge Davis against FX & Beyond in his Report and Recommendation dated February 2, 2018. According to the Commission, these proceeds rightfully should be paid to FX & Beyond, not Ms Karroum, and should therefore be available to satisfy the company’s anticipated liability to the Commission.
If the Court does not immediately freeze these proceeds, the funds will likely be transferred out of the US, and the Commission may never be able to fully collect on its claims in this case, the regulator says.
The case is captioned Securities and Exchange Commission v. Karroum et al (1:17-cv-00187).